Been searching a few months now, and one question I keep running into (with no clear answer thus far) is the actual mechanics of assigning equity to investors and how this interacts with a searcher's choice of entities.
It's clear that many, if not most, self-funded searchers (of which I am one) form an LLC as the search vehicle. I've done this part recently. Where I am a little lost is how this interacts with the later purchase of a target company. I will be raising some amount of equity from investors. From what I can understand, typically those investors would be offered a preferred return, and some common equity.
2 big questions then: 1) Isn't a C Corp needed for the equity issuance / management? 2) What exactly is the use of the LLC search vehicle then - is it a good idea to have simply for expenses, is it designed to be restructured as a C Corp at the time of acquisition, should I just ensure the acquisition is a C Corp, does it make sense in the first place for the search vehicle to be the entity purchasing the acquisition?
Would appreciate if someone can answer these questions clearly. Thanks!
Assigning Equity to Investors / Structuring
by a searcher from University of Virginia
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We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
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